[Analysis] “cheap” millet why so money
Thanks cottage analyst posted
News source: original comment
This time around the millet 4 billion dollar valuation debate is blaze. Although the low price high profit distribution, does not rely on hardware is the slogan of millet, but we must also understand that the valuation of us $ 4 billion is obviously not a profitable company can get. Of course, what analysts are each earning 100 or 700 the cottage was not, really interesting question is why cheap millet can earn so much money? If 1999 earnings were so significant, then the other 2,999, 4,999 products are not even make fly? If not, then where is the difference in the end?
Don’t be so quick to me shouting millet selling 1999 not cheap, you know millet in the 300,000 units shipped, which late last year when it has achieved a balance, when 1999 ‘s prices are very competitive. Text of word length, no one wants to see, here on the simple analysis of this question from three aspects.
The first one Cut channels, facing the customer
Had said as early as last August millet entity channels won’t go traditional, but networking sales approach will be used, thereby saving channel costs for a low price. Indeed in traditional distribution channels in the system cost is a more important part, layers of agent system makes final consumers will get premium prices are often 30% even more. Millet in pure sales network way, get rid of all the intermediate circulation can indeed reduce the cost of this part, and to obtain lower prices.
But this is millet to maintain margins of reason? Not necessarily. With the rise of Internet shopping in recent years, traditional channels will inevitably suffer, as a countermeasure, which channels are in fact in the field of electronic products for several years in development to replace the original flat hierarchical structure, many companies have begun using the network direct or ways of cooperation with stores, most of the time entity channels has been simplified to the 1~2 layer. In such cases, occupies only about the ratio of the channel in the sale price of 10%, for a price 2000 block phone also only 200 blocks. Millet company later and not, as said himself in network only channel sales, millet actually phone currently is the main shipping channels of carriers to customize, which is a traditional channels, will certainly bring millet channels such as display, advertising, inventory costs. While millet phones do take advantage of channels of reducing a portion of the cost, but the profit contribution is insignificant.
The second enrollment Listing the first, selling second
Millet once said “no design is the best design”, for which many people now ridicule road, millet’s philosophy is “there is no after sale is the best after sales”. Believe see millet Forum should be able to find, after the mobile phone up to complain is available for sale on millet. Remove mobile phones damage users phones themselves be mailed back to millet company (delivery costs paid, reimbursed only up to 15 Yuan, also does not assume responsibility for the express risk in the process), could not be contacted after-sale, maintenance and test cycles are too long, excessive fees, liability after found to be reasonable, and even mail no one complaints admitted are common. Less than a year the company shipped more than 3 million units, sales data is very bright eyes, but no millet company with the same speed and scale your sales system. Although millet company promised has invested strongly supplementary sales links, but so far the millet is still not complete after sales channels. Odd millet houses throughout the country, many are operating in residential buildings by one or two people take care of small service does not bear the responsibility after the sale, is compounded by the millet-phone repair rate is relatively high, it also further increased the pressure on the aftermarket.
Such a situation is understandable, after all, millet pressure behind the venture capital, burdened with the pressure of the fastest companies in many cases can only be so desperate to speed shipments, return of funds to meet the demand for VCs rewards, while vigorously developing after-sales such long-term investments will lose short-term gain often failed in the first place to consider. Taking into account the millet-phone repair rate, if you want to obtain international brands an equal level of after sales, costs will be needed more, so estimating savings due to after-sales, millet phone profit contribution is about 50~100 Yuan.
Third enrolment Featured programme, streamlining costs
We analyse the two preceding points, although millet earn high profits of the mobile phone, but they ultimately profit contribution do not crumble so much. Millet phone means maximum profits should come from the product itself. In this regard, we can be divided into three terms.
, Select a lower development costs and the cost of purchasing platforms. We all know millet phone using Qualcomm platform, specifically the MSM8260 processor. Although this processor frequency is very high, but the actual performance in General, millet this processor was chosen mainly because of the high-throughput platforms have a lower overall cost of procurement and supply chain, but also can save development costs. A Tegra mobile phone or Exynos as the core, processor, audio, GPS, WiFi, Bluetooth, power management, RF amplifiers, RF modems, baseband processors need to be purchased from different vendors, and the use of high-throughput screening programmes can all be provided by the company. While the high-throughput screening programme in any way is not the best, but a high degree of integration, manufacturers save a lot of development and operational costs. Select Qualcomm millet programme, is the first step in reducing hardware costs.
Second, eliminating unnecessary hardware, feature, and hidden costs. Millet frequent and major international companies from the beginning of the mobile phone compare top products, but officials often concerned only with data such as frequency, core, memory, while ignoring the many hidden costs and features. Mobile phone is not equipped with a front-facing camera such as millet, which can bring about cost reduction of us $; millet phone is not equipped with a gyro, it can also lead to cost reduction of us $; millet phones only built-in 4GB NAND, which can bring the number of dollars to dozens of cost reduction of us $.
Hardware distribution reduction is only one aspect of millet phone also removed a number of high-end mobile phones are equipped with features. We know what the current high-end mobile phones all with the MHL go HDMI output 1080p video capabilities, but many people do not know is such a feature is very expensive. Product support MHL removal other than to pay tens of thousands of dollars a year in contributions, each device needs a 5-dollar licensing fee, also requires the additional purchase of a conversion chip, millet does not carry this feature can save costs of US $ 5~10.
Three, uses cheap parts, second-tier suppliers and low cost manufacturing process. Although millet has claimed their products use the top-level components of the global top 500, but obviously this does not correspond to reality. Millet actually mobile phone spare parts selection, except other than Qualcomm processor, are basically more low-end models, such as cheap home-made 8 million pixels camera (photo effects for all to see), compared to high-end back according to camera, cost of a gap may be closer to $ 10. And performance in mainstream products a better PET touch screen, millet phone still is relatively backward in the single-layer glass touch-screen, it will cost a few dollars difference. Split type design of frame structure, relatively low-grade injection material (many users react borders screws cracked), poor LCD screen, and so on, millet phones are doing everything possible to reduce hardware cost, even the most common sense of resistive and capacitive component is no exception.
And for this we need only simple high school low-end products to make a comparison of international and domestic, the difference is evident.
Conclusion I think we all can see that and there is not much analysis. Current international high-end cell phones most of the hardware cost around US $ 180~200, based on actual materials analysis, millet phone hardware costs will not exceed $ 120, so in terms of hardware, millet mobile phones through the streamlining of Omni-directional, relative to its main competitor in the publicity saves at least $ 60, which is at least approximately 400 Yuan.
Through above of calculation view, millet phone through various aspects of operation, relative Yu manufacturers of phone,, savings of cost about in 500 Yuan around, this basically and Zhou hongyi by said millet phone of profit roughly same, therefore we can are conclusions, if millet company in accordance with equivalent Yu industry of standard to manufacturing phone, then this price indeed is cannot profit of, but millet company and no so do, this is millet phone of profit sources. This $ 500 worth of cost, is about 1000 RMB on the reaction to the price, while other companies ‘ operating costs, taking into account the size and investment in research and development, we can understand why other companies sell more expensive than millet, but will still lose money. From this point of view, the millet high profit for mobile phones is not healthy, because it is at the expense of the quality of the product and the service for, which is a good thing for investors, but for users who are not. Millet, if they want to truly based on this market, rather than being just a Flash, lot also needs to change.